Nevada law provided that every “original contractor” is liable for “indebtedness for labor incurred by any subcontractor or any contractors acting under, by or for the original contractor in performing any labor, construction of other work included in the subject of the original contract, for labor . . . .” NRS 608.150. The statute made it unlawful to attempt to evade this responsibility or to fail to comply. NRS 608.150.
This statute resulted in numerous disputes regarding the definition of “original contractor” and what constitutes labor. This statute resulted in general contractors, subcontractors and their sureties facing substantial claims for the payment of labor twice – once to the subcontractor / sub-subcontractor and then a second time to the laborers who were not paid. Regardless of the “original contractor’s” best efforts to ensure that all labor was paid, there was no relief under the statute and no obligation of any laborers or their representatives to provide any notice of nonpayment to the “original contractor”. Union related trust funds were most aggressive, seeking not only the actual wage but also the attendant fringe benefits, liquidated damages, attorneys’ fees, costs and any other potential entitlements under the respective collective bargaining agreements. The aggressive stance was typically premised on the trust funds alleged fiduciary duties pursuant to ERISA.
Some clarification has been provided. During the 2015 Nevada Legislature, the Nevada legislature passed Bill 223, approved by the Governor on June 4th, 2015, that would make this Statute less controversial and define the liability of contractors for unpaid subcontractor related labor claims.
Definition of “Prime Contractor”
One issue addressed was the definition of “original contractor”. SB 223 attempts to clarify this by substituting the term “prime contractor” for “original contractor”. The definition of “Prime Contractor” is found under the NRS 108.22164, which says:
“Prime contractor” means:
1. A person who contracts with an owner or a lessee of property to provide work, materials or equipment to be used for the improvement of the property or in the construction, alteration or repair of a work of improvement; or
2. A person who is an owner of the property, is licensed as a general contractor pursuant to chapter 624 of NRS and provides work, materials or equipment to be used for the improvement of the property or in the construction, alteration or repair of a work of improvement.
To qualify as a “prime contractor” an essential element is a direct contract with an owner or lessee of property. Accordingly, a subcontractor is no longer an “original contractor” under the old statute or “prime contractor” under the new statute unless the subcontractor contracts directly with an owner or lessee of property.
Another clarification is that trust funds are not entitled to recover as a “fringe benefit” the following: interest, liquidated damages, attorney’s fees, costs or other penalties that may be incurred by the employer of the laborer under any law, collective bargaining agreement or other agreement. This provision should assist sureties and contractors in the resolution of any labor related claims.
A further requirement pertains to notice. A prime contractor is obligated to notify a trust fund upon commencement of the work. This notice then shifts the burden to the trust fund to provide notice to the prime contractor in the event of unpaid fringe benefits. A prime contractor no longer assumes the liability of a subcontractor or other contractor for any amount for which the prime contractor does not receive notice. A trust fund is now required to provide notice of delinquency to the general contractor within 15 days from the date upon which any contribution is deemed 60 days delinquent.
Notice of Delinquency & Statute of Limitation
Notice of the delinquency must be given to the general contractor and delinquent subcontractor by electronic mail, telephone and personal delivery or registered or certified mail with a return receipt request. The notice must include the amount owed, the name and address of the general contractor and subcontractor, and a demand for full payment of the amount not paid. This amendment will assist contractors in the financial management of contracts without fear that years down the road, trust funds or other laborers will assert claims for unpaid labor at a time when the contract is closed and the contractor can no longer protect its interests by withholding contract funds and pursuing other protection.
Finally, the statute has shortened the statute of limitation from two or three years (depending upon if the “principal contractor” is located within or outside Nevada) to one year after the date the employee should have received wages or benefits.
Should you have further questions, please do not hesitate to contact a representative of the Faux Law Group.